Why We Ditched That $1.6 Million Condo For A Resale HDB Flat Instead

It’s nearly a cliche by now that every Singaporean’s dream is to buy a condo. Whether it is in the hopes of making money or to chill by the swimming pool on weekends, there’s no denying that the pull is strong. But is a condo necessarily the right decision for everyone? This week we spoke to M, who started off thinking of a condo, but decided on an HDB flat instead. Was it worth it? Well, here’s their buyers’ home journey in detail:

The initial plan to upgrade

When M started looking for a new home, her thinking was in line with most Singaporeans:

“We had a 4 room HDB flat which we sold due to our growing family. The perception amongst many families in Singapore is that a condo is the next step to upgrade to, with nicer facilities, which is why we chose to look for the condominium.”

Asset progression has been considered a norm for close to two decades now, and even in 2021, the bulk of condo buyers in the Outside of Central Region (OCR) have been HDB upgraders. 

M and her family started their search in the Bukit Panjang area, which they felt was an undervalued area, with room for appreciation. They also liked the area’s connection to the Downtown Line, via the LRT. 

Their two initial choices were both condos in Bukit Panjang:

• A low floor unit at around 1,184 sq. ft., with a listed price of $1.6 million but a valuation of $1.4 million. 
• A mid-floor unit that was a bit larger at 1,200 sq. ft., with a matching valuation and asking price of $1.6 million. 

Both condos were completed in the late 2010s, and both were leasehold. 

Besides this, M also initially considered a freehold option:

“We were rather keen on a condominium in the West Coast area due to its freehold status. The price was asking for $1.65 million, but they had rejected the last offer of $1.57 million; and the unit was also tenanted until October 2022 which did not suit our timeline. 

Upon viewing, the unit was also on a low floor and faced the AYE – there was significant noise. We did not go ahead with making an offer on that as we were looking at a home for own stay. It would have been a contender if we had been looking at it for investment purposes though!”

Despite initially seeking a condo, other considerations caused a change of heart

In the environment of rising prices, getting a deal on the condos was difficult. The first unit that M put in an offer for was declined, with the seller wanting $160,000 above valuation. Even after negotiations, the seller wouldn’t budge from $130,000 above valuation. 

(Note that bank home loans are based on the lower of the price or valuation, which means any amount above valuation must be paid in cash. E.g., if the price is $1.1 million, but the valuation is $1 million, then the maximum loan amount is 75 per cent of $1 million ($750,000). The extra $100,000 above valuation would on, to the already high cost of the down payment).

For the second condo unit, the seller wanted six to nine months extension to stay on after the deal; with a further possible extension later. 

Both deals were unpalatable to M’s family.

This prompted another evaluation of costs

M and her spouse are both middle-income earners, so the $1.6 million to $1.7 million price tags made them reconsider their decision. A key concern was the substantial amount of their CPF monies, which would be committed to the mortgage; even if they would pay part of the mortgage in cash. 

M says that:

“While both our jobs are relatively stable right now, anything can happen and we didn’t want to over-leverage ourselves. Further, we didn’t want to take a loan from our parents, as we did not want them to dip into their retirement savings; and we also wanted to try to pay off the housing loan as soon as possible.”

Borrowing from parents is not unusual, by the way. For many Singaporean home buyers, the greatest hurdle is the sizeable down payment; and for private properties, the minimum required down payment is 25 per cent, of which the first five per cent must be paid in cash. So it’s quite common for many younger condo buyers to borrow a bit from parents, to cross the initial hurdle. 

M also realised that:

“When looking for HDB resale flats, we realised that for the same product, a million-dollar HDB for example, the costs are still substantially less than a condominium.

For example, a 1,200 sq.ft. HDB which is 10 years old, in a Central Area, may fetch $1.1m; but a 1,200 sq.ft. leasehold condo which is 10 years old, at a non-central location, will still definitely cost more than $1.1 million. Of course it’s definitely not an apples-to-apples comparison but it’s pretty close.”

While a condo carries a degree of social prestige, M notes that the people judging aren’t the ones saddled with the mortgage.  

“Part of the reason why we decided to go for a resale HDB so that we could use our money to enjoy little luxuries, not scrimp and save on necessities; we can invest and so on, and be able to aggressively build on our emergency fund.”

How much do condo facilities really matter?

The key difference between condos and HDB flats would be the common facilities. The pool, gym, clubhouse, etc. are supposed to offer luxuries and amenities at your door. 

However, M’s family concluded that: 

“We are already members of a public service club which gives us access to facilities like a pool, barbecue pits, tennis courts and the like. If we stay in a condominium, we would have to pay monthly maintenance fees, on top of the mortgage for access to the same type of facilities.”

While the condo facilities would be more exclusive and involve fewer crowds, it did not make up for the drawback of paying twice for similar facilities. 

“Also, our kids are at a stage where we would prefer to head out to the great outdoors,” M says, “So we asked ourselves how often we would really use these facilities, and the uncomfortable truth was we would rarely use them.” 

Finding a resale flat and saving a fortune

M found the process of finding a resale flat to be smooth, as the lower cost meant more choices within their budget. They eventually settled on a 5-room resale flat at Clementi, of around 1,200 sq. ft. The unit is only eight years old. 

“For our current home, we liked its location which is near nature (Park Connector Network, Rail Corridor). 

Clementi is also a mature town with a lot of facilities, amenities, and many educational institutions in the area, and is along the PIE and the East-West Line where both of our offices are located. 

We must also thank Stacked Homes for its very insightful and independent reviews on the Clementi estate which gave us a very good walkthrough of the area. and helped us conclusively shift our mindset from Clementi and to look at an HDB resale instead of a condominium!

For the location that we eventually picked, the supermarket, clinics, hawker centre, and other amenities are nearby – and about seven to nine minutes’ walk away from the MRT. Finally, the space was decent given the price – definitely enough room for our family – without worrying how to meet next month’s mortgage and expenses.”

M was not entirely without concerns, as it’s quite common to hear the theory that HDB flats can be depreciating assets. M was told by some property agents that condo units are better for returns, and en-bloc potential. 

(But these are true only in a very general sense; there’s no guarantee of an en-bloc sale, for example; and some flats can outperform condos, given their lower cash outlay and price). 

However, it was the potential savings that formed the deciding factor. 

By choosing a resale flat instead of a condo, M estimates her family saved at least $600,000, in comparison to the condos’ valuation prices alone. Her family intends to live there for a long time, so the Minimum Occupancy Period (MOP) isn’t really a factor; and due to the significant savings, they can be more generous with renovations. 

As an aside, we’d point out that – with more available funds to set aside – M and her family still have a good chance (or perhaps an even better chance) of getting a condo further down the road, if they decide they want it. 

Some parting advice for readers

“If you are shopping for a home,” M says, “Don’t feel pressured by people saying that a condominium is an upgrade. Look at your needs, what you’re comfortable spending every month, and what your priorities are. Ours was space and convenience, and being able to move in as soon as possible. 

If a condominium suits your purposes, go for it. If an HDB suits your purposes, don’t be shy to go for it! Of course, if you are shopping for an investment property, it’s a whole different ball game altogether!” 

For more home buyer journeys and homeownership concerns, follow us on Stacked. We also provide in-depth reviews of new and resale condo units alike, for you to make a well-informed decision.